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Just to elaborate on this for 415 compensation (used for 415 limits and TH) you must aggregate compensation from all "employers," which in this case is all members of the CG. For 414(s) comp (used for nondiscrimination tests, which includes the denominator of the ADP/ACP tests, and as pointed out, only matters if someone is getting comp from both companies), you must use 414(s) compensation. 414(s) comp starts with 415 comp and you can make certain adjustments, some are deemed to be nondiscriminatory and others must be tested. Excluding comp from an employer that is part of the CG, regardless of whether that ER adopted the plan, is not a safe harbor adjustment. Therefore, if you exclude the comp for the nonparticipating ER, then it's subject to annual 414(s) testing. This is generally operational in all plans - pre-approved plans aren't required to define 414(s) compensation. Last is compensation used to actually determine benefits. This must be defined in the plan. If you exclude comp from the nonparticipating member of the CG, then you can't have a designed based safe harbor allocation or benefit formula (because it's not a safe harbor method when comp doesn't automatically satisfy 414(s)). But as a practical matter, if you test the comp and it passes 414(s) then no problem. If you fail 414(s) then your benefit or allocation formula would be subject to general testing (and you'd have to use 414(s) in that testing).

M Norton, I have had this case twice. One time involving 10 years, a small company, and $1 million in back contributions, the other a larger company involving about $4 million in missed contributions over a similar period. The questions you need to ask include (1) was the exclusion consistently applied across all time periods, (b) as justanotheradmin points out, does the plan pass 414(s) with the exclusion, and (3) were the employee communications such as SPDs consistent with plan language or exclusion. To make a long story short, in both cases we had a consistent practice of exclusion, we passed 414(s) for all years with the exclusion, and at least arguably the employee communications were more consistent with what the plan had done, rather than how it read. In one case I was able to convince myself and the CPA auditor who had discovered the problem that the plan language could be interpreted reasonably to support the exclusion. In the other case (which was discovered in connection with a vendor change), no such argument was possible. We filed a VCP request and were able to get some of the years (the largest) retroactively corrected by conforming plan document retroactively to the exclusion.

If that type of compensation was excluded - would it have passed §414(s) testing? I would start by looking into a VCP submission. If the sponsor isn't comfortable 'fessing up so to speak, an anonymous submission is an option (though that comes with it's own pros and cons). In the submission you can propose a retroactive amendment that excludes bonus from deferrals. I'd think the VCP fee and submission cost would likely outweigh any corrective QNEC that would be due for a missed opportunity to defer or a failure to follow deferral election. Was anyone's ability to defer actually impacted? Or were participants able to reach their deferral goals? i.e. maximizing deferrals through regular pay? Can you make the argument that the NHCE weren't harmed? I know there are lots of folks with good ideas on these boards, hopefully some will chime in other options to consider.

Correct.

It's my understanding that the Act is effective for distributions made after 12/31/19, and are for individuals who attain age 70 1/2 after 12/31/19: This requires an amendment to the document provisions and is optional; plan sponsors may choose to retain an earlier age.